Why We Are Borrowing To Finance Govt’s Budget-Buhari

…Orders MDAs, Others To Grant Access To FIRS For Tax Collection

President Muhammadu Buhari on Thursday said that the inability of the Federal Government to generate adequate revenue to fund its programmes was a major reason for the huge borrowing in recent times.

He explained that his administration has been borrowing money to finance the economy and development as a result of dwindling revenues.

The President said these virtually, on Thursday at the First National Tax Dialogue held at the Conference Hall of the State House in Abuja, with theme, “Taxation in a post-Covid Economy”

He, however, tasked the Federal Inland Revenue Services and other relevant government agencies to explore all standard practices to boost revenue.

The FIRS had in recent times been unable to meet its revenue target a situation that made the Presidency to query the immediate past chairman of the Service, Mr Babatunde Fowler over revenue shortfall.

Within a ten year period covering 2010 and 2019, the FIRS recorded a revenue shortfall of N4.88tn, based on figures obtained from the service.

The FIRS data showed that during the ten year period, the service generated about N43.41tn revenue from taxes.

When compared to the N48.29tn targeted revenue set by the Federal Government for the ten years period, this represents a shortfall of N4.88tn.

Speaking on revenue performance, Buhari directed the FIRS to plug all revenue leakages by ensuring strict compliance of tax payments by foreign companies operating in Nigeria.

He called for the deployment of more digital platforms and seamless connections.

He noted that the tax dialogue became imperative for the administration at the moment because of the revenue gap, adding that having to borrow to augment the budget in order to be able to fund urgently required development projects had increased the nation’s debt profile to as much as N32trn as at September of 2020.

Within a three month period covering July and September last year, the total debt stock of Nigeria rose to ₦32.22trn, figures released by the Debt Management Office have revealed.

According to the DMO, Nigeria’s debt stock grew by N1.214trn between June 2020 and the end of September 2020.

An analysis of the DMO public debt figures show that 37.82 per cent represents external debts, while the balance of 62.18 per cent is for domestic debt obligations

The debt accumulation is coming at a time when key government officials in the Economic Management Team had repeatedly defended the country’s debt level arguing that it is still within sustainable limit.

But Buhari said, “The government had inevitably resorted to deficit budgeting as a result of declining revenues for some years, resulting in an increase in Nigeria’s debt profile.

“As we might expect, this has led to increasing in Nigeria’s debt profile which stood at about N32trn in September 2020. This funding gap created by the dwindling government revenue, therefore, underscores the importance of the national tax dialogue we are holding today.

“No nation has ever made progress without having to pay for it or make the necessary sacrifice. I, therefore, call on all Nigerians to be alive to their tax obligations. This government is strategically restructuring the tax revenue mix in favour of indirect taxes in accordance with our national tax policy document.

“To this end, FIRS is mandated to do all that is required in order to efficiently collect tax revenue due from transactions carried out using local and foreign online platforms. The government has made relevant statutory amendment to tax laws in the Finance Act 2020”

Buhari also mandated Ministries, Departments, Agencies and business enterprises to grant access to the FIRS to their systems for the purposes of tax collection nationwide.

The President also directed the FIRS to “speedily put all measures in place to fully implement programmes to stamp out Base Erosion and Profit Shifting in all of its ramifications and generally automate its tax processes.”

In addition, Buhari urged the FIRS to fast-track its digitalization of the tax collection process.

The President said: “I have directed all government agencies and business enterprises to grant FIRS access to their systems for seamless connection. We all are now living in a fast digitalising world.

“As such, business transactions are continually being migrated from ‘brick and mortar’ locations to digital places or spaces. It is therefore incumbent upon tax authorities to adopt digital means to efficiently track taxable transactions for the purpose of collecting taxes.

“In order to provide the necessary legislative framework for the adoption of technology in tax administration, we also made necessary amendments to the FIRS Establishment Act in the Finance Act 2020.”

Also speaking at the event, the President, African Development Bank, Dr. Akinwunmi Adesina, gave assurances that the AfDB would support the FIRS to modernise the tax collection processes in Nigeria through capacity building.

In her opening remarks at the Dialogue, the Minister of Finance, Budget and National Planning, Mrs. Zainab Shamusuna Ahmed, highlighted some provisions of the Finance Act 2020, stating that a number of these provisions were enshrined in the Act in order to help businesses, especially SMEs, recover from the adverse effects of COVID-19.

She said tax compliance was key to national prosperity, noting that government was determined to minimise the incidence of tax evasion through suck leakages as cross-border transactions through maximum use of technology.

The Finance Minister urged the audience to generously contribute their ideas during the dialogue in order to improve the nation’s tax system.

In his address of welcome at the event, Executive Chairman, FIRS, Mr. Muhammad Nami, underscored the importance of the dialogue, stating that the FIRS would match on to digitalise the tax process fully.

He canvassed the cooperation of the three tiers of government, the citizens and corporate organisations in the country for the success of the digitalization drive.

He said, “The FIRS started the journey to automation several years ago when it launched “Project Fact”. Several other initiatives were launched to further take advantage of evolving technology in taxpayer registration, online payment platforms, remote filing of returns.

“However, there was very limited success with the various initiatives due to inadequate statutory framework. A quantum leap was achieved with the 2020 Finance Act which copiously provided legal grounds for deployment of technology in tax administration.

“The Service is grateful to the President, the leadership of the National Assembly, the Honourable Minister of Finance, Budget and National Planning and all other stakeholders that worked together to enact the necessary laws.

“The Service is taking advantage of the new law to embark on studies with the assistance of friendly tax authorities and international tax organisations with a view to developing a robust digitalisation roadmap.

“The roadmap will enable the Service to digitalise its whole operations (end-to-end) in a systematic, coherent and efficient manner.”

Nami said the FIRS is starting this decade with the resolve to leapfrog tax administration into the digital age.